Howard Rheingold's Tomorrow column"The Internet and the Future of Money"

Part I (April 16, 1997).
The Internet might be more than a new kind of marketplace and a new medium for exchanging money as we know it. If Bernard Lietaer and others are right, the Internet might lead to a radical change in the nature of money. Lietaer, fellow at the Center for Sustainable Resources at the University of California at Berkeley, was a central banker and currency manager in Belgium, with twenty-five years of working with governments and banks. He believes that money as we know it is due for a radical change; right now he's working on a book, 'The Future of Money: Beyond Greed and Scarcity." He is one of a number of people around the world who have been working on the idea of 'alternative currencies' or 'local money' that keep resources recycling within communities, instead of draining money out of communities. These efforts predate the Internet, but Lietaer sees the Net as a vehicle for accelerating the changes that he and others have been foreseeing for years.

Money, according to Lietaer, can be defined in several ways: 'Money is information about the way we exchange energy,' he says. 'Money is an agreement within a community to use something as a medium of exchange. The agreement can be conscious or unconscious, coerced or free. Most of us don't consciously choose our money. We have an opportunity to change that. The Internet is a space where that is possible to do. I expect a flourishing of money systems in the coming years. 95% of these experiments will fail. But the 5% that succeed will change the world.'

'Some implicit built-in mechanisms in money systems have social implications,' Lietaer claimed in a recent interview. 'First, currencies are national, an assumption based on 19th century emergence of nation-states. All the money we have is debt-generated--someone goes to a bank and makes a loan. This pits people against each other, collectively. Competition is built into the money system. Greed and the breakdown of community that everyone is complaining about correlate with the use of competitive money systems. But there were no money exchanges in monastic communities. The word "community" comes from Latin, meaning "exchanging gifts among each other". Some money systems can preserve this mechanism.'

Examples of money systems that preserve the gift aspect of communal energy exchange are formal systems for keeping track of the value of goods or services exchanged between members of a defined group. These differ from national currency because they are valid only within the group. For example, a local currency in your town could be an exchange arrangement that a number of people would agree to. Unlike barter, where you would mow someone's lawn in exchange for a quart of milk, you could agree to contribute a certain number of hours of lawn-mowing to your 'account'. Someone who had a dairy farm could contribute a certain number of gallons of milk. Instead of forcing lawnmowers (or anyone with a skill or commodity) to seek out dairy farmers, the farmer could go to the local exchange bank and turn in a number of milk credits in exchange for a number of lawn mowing credits. Everyone who contributes a number of credits to the local currency bank can exchange those credits for goods or services from other members of the community, and must work off those goods and services by contributing to those who have need of whatever they have to offer.

'Local Exchange Trading System' (or LETS) is the name for a system for recording transactions between members of a group who agree to provide goods and services to each other. This group produces a directory which lists their skills, services and goods, together with requests for anything they wish to obtain in trade. Such systems predate Internet-based transaction systems, but are adaptable to online communication and accounting systems.

Next week, we'll look at a number of these local currencies, and see how the Internet might facilitate them. Information about Lietaer and his theories and other resources related to alternative forms of money can be found at http://www.transaction.net/money/community/index.html.